Granite Company purchased a machine costing $124,000, terms 2/10, n/30. The machine was shipped FOB shipping point and freight charges were $2,400. The machine requires special mounting and wiring connections costing $10,400. When installing the machine, $1,900 in damages occurred. Compute the cost recorded for this machine assuming Granite paid within the discount period.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Granite Company purchased a machine costing $124,000, terms 2/10, n/30. The machine was shipped FOB shipping point and freight charges were $2,400. The machine requires special mounting and wiring connections costing $10,400. When installing the machine, $1,900 in damages occurred. Compute the cost recorded for this machine assuming Granite paid within the discount period.
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